Start talking about helping homeowners.

The consensus forming around the government bailout of the financial industry over the last days has been that some major financial institutions will have their hides saved and taxpayers will foot the bill. This is true as far as it goes. But it misses a crucial point about the kind of bailout we need to have, and, ideally, will have as the details get worked out: For a bailout to make sense, it has to help both financial institutions and homeowners facing foreclosure.

Critics of the bailout complain that for the government to buy up scads of nearly worthless bonds props up investors who should have known better that their mortgage-backed securities and derivatives would blow up in their faces. But buying all this bad debt also lets the government do something that banks and Wall Street absolutely can't do themselves, which is restructure the bad mortgages that made all this happen in the first place.

Behind the financial crisis (the tough guy in the fedora knocking on the door), there's the foreclosure crisis (the dim heavy-lidded brute with the muscles). This is what's directly affecting millions of people who cannot stay in their homes and indirectly affecting tens of millions more who are watching the uncontrolled plummet of their savings and property prices. A rising chorus of politicians and pundits has called on banks and mortgage underwriters to restructure their failing mortgages to give borrowers a chance to repay.

Unfortunately, as things stand now, the financial institutions that wrote the mortgages and hold the mortgage-backed bonds cannot do that. Why not? A mortgage-backed security is a bundle of hundreds or thousands of mortgages, split up into series of bonds with varying terms and repayment rates. The bondholders cannot modify the terms. And in practice, the mortgage companies that wrote the loans usually can't, either.

Buried in the hundreds of pages of legalese that define these complicated bonds (they're on file with the Securities and Exchange Commission) are terms that make it difficult or impossible to change the terms to make it easier for borrowers to repay. For instance, consider the restriction on a bundle of 1,219 loans originated by Wells Fargo and sold to investors by Goldman Sachs. Under its terms, if a borrower faces imminent foreclosure, Wells Fargo can modify the loan but

"no such modification shall forgive principal owing under such Mortgage Loan or permanently reduce the interest rate on such Mortgage Loan."